High-Rise Office Market.
Approximately 29% of the Orange County Office market is made up of high-rise projects, buildings seven stories or greater. Average asking lease rates, which have been steadily rising in the high rise market, finally dipped in the first quarter. Net absorption for high rise product finally improved in the first quarter and pushed vacancy rates down to 10.57%.
The average asking lease rates for high-rise office space had been steadily increasing over the past five years, but seemed to top off in the fourth quarter of 1999.
In the first quarter of 2000, asking rents dropped to an average of $2.38, down four cents from year-end 1999. Despite the decline in lease rates for the quarter, the current rate is $.18 higher than that of one year ago. High-rise office projects continue to have the highest rent average in the Orange County market with an average asking rent $.30 above the total average for the County.
Vacancy in the high-rise office market had been affected by the increasing asking rents. As the rates have dropped in the first quarter of 2000, so has the vacancy for the high-rise product. Positive absorption of 150,765 in the beginning of the year pushed the vacancy rate below 11% to 10.57%.
The current vacancy is an improvement of 6% from the previous quarter when the vacancy was at 11.21%. A year ago, in the first quarter of 1999, the vacancy rate for high-rise space was at 9.97%.
Although most of the construction activity in the Orange County office market has been happening in low-rise projects, there is some new development in the high-rise office market.
One building, Lakeshore Towers II, broke ground early in the fourth quarter which will add another 230,000 square feet to the market in Irvine. Two more buildings, The Twin Tower buildings in Santa Ana, also broke ground early this year. This project will consist of 2 nine-story office buildings totaling 412,000 square feet. Another building, Koll Center Irvine North, Phase II, a 170,737 square-foot, 8-story office building in the Airport Area, is planned for construction. This will be the twin office tower to Koll Center Irvine North, Phase I that completed construction during the third quarter of 1999.
